When ThyssenKrupp AG started scouting a site for a new $3.7 billion steel mill, it set off a fierce bidding war between Alabama and Louisiana. Louisiana offered more financial incentives and a better riverfront site, but last year the big German steelmaker chose the Mobile area instead of a location near New Orleans.
Nobody at ThyssenKrupp cited Louisiana's reputation for rampant political corruption as a big turnoff, but some in and around the Big Easy believe that it hurt the state's chances to snag the jobs-producing mill. And that shady image, despite efforts to improve it, remains a thorn in Louisiana's economic development efforts.
Illinois, take heed. The state's formidable reputation for political corruption hit a new low this week with the arrest of Gov. Rod Blagojevich on charges so brazen they might shock Edwin Edwards, the imprisoned former Louisiana governor and a gold standard of sorts for modern gubernatorial corruption.
Yes, Illinois is a far cry from Louisiana: Its economy is far more vibrant, its workforce more skilled, its population more educated. But the image of corruption is an important intangible factor that can affect a state's economic vitality, some economic development experts say. It signals to businesses that rules are squishy and the economic deck is stacked.
"There is an issue with trust in the political system, being able to rely on a certain set of rules," said Timothy Bartik, an economic development expert at the Michigan-based W.E. Upjohn Institute for Employment Research. Corruption "creates tremendous uncertainty," and uncertainty is bad for business, he said.
David Audretsch, an economic development expert at Indiana University, said corruption can cause companies, particularly those beyond a state's borders, to fear they're not on a level playing field. Their line of thinking: "Insiders are being favored, while outsiders are disadvantaged," he said.
In the federal complaint against Blagojevich, executives who do business with the state are met with blunt demands for a financial quid pro quo in the form of campaign fundraising activities. And then, of course, there's the bombshell allegation of Blagojevich horse-trading President-elect Barack Obama's U.S. Senate seat for financial favors.
"I've got to believe that Edwin Edwards is looking at this from prison and saying, 'I could never get away with something that brazen,' " said Ivan Miestchovich, director of the University of New Orleans Institute for Economic Development and Real Estate Research.
Suspicions of corruption long dogged the colorful Edwards, who famously said he would lose a key election only if he was "found in bed with a dead girl or live boy." In 1991, when he ran for a fourth term against erstwhile Ku Klux Klansman David Duke, voters rallied around Edwards with the campaign slogan, "Vote for the crook, it's important."
Edwards' luck ran out in 2000, when he was convicted of racketeering, extortion and fraud. Since Edwards left office in 1996, Louisiana's governors have largely stayed out of trouble, and the latest one, Bobby Jindal, is being hailed as a reformer and up-and-comer in national Republican Party circles.
But New Orleans, like Chicago, has been rife with political corruption cases in recent years, and the stigma lingers. Take ThyssenKrupp's choice of Alabama over Louisiana for a massive new steel mill, an economic plum set to create 2,700 jobs.
Just a few months before ThyssenKrupp made its choice, the Mobile Press-Register published an editorial cartoon taking a swing a Louisiana's political culture and then ran an editorial noting Louisiana's "fetid history of political corruption."
In the end, ThyssenKrupp reportedly chose the Alabama site because electricity, a big expense in making steel, cost considerably less there. A company executive also told a local paper the firm liked "the way Alabama thinks about business."
Though ThyssenKrupp never mentioned Louisiana's notorious political image, there's a perception among some that it hurt the state in the steel mill fight, said Barry Erwin, head of the Council for a Better Louisiana, a non-profit advocacy group.
That suspicion is grounded in research. A few years ago, out-of-state business executives surveyed by Louisiana State University's Public Policy Research Lab said curbing corruption was one of the top ways Louisiana could improve its business image.
"The issue of corruption comes up, there's no doubt about it," Erwin said.
Miestchovich said that Illinois, with a richer and more diversified economy than Louisiana, can probably better weather "storms" brought on by allegations of rampant political corruption.
But as long as Blagojevich remains in the media spotlight, so will Illinois, and that's bad for the state's image, he said.
"The longer he stays, the worse it is," Miestchovich said. "They have to get that guy out of there and clean up the mess he's made."
There's talk among Illinois legislators of impeaching Blagojevich. Meanwhile, Illinois Atty. Gen. Lisa Madigan has called on the state's Supreme Court to temporarily remove Blagojevich and appoint Lt. Gov. Patrick Quinn as acting governor.
David Merriman, a professor at the Institute of Government and Public Affairs at the University of Illinois at Chicago, said that while the Blagojevich scandal is "definitely a black mark," it could spark reform that eventually could help Illinois' economic prospects.
"If I was a company thinking long term about Illinois, I would think, 'This is the kind of shock and publicity that means Illinois will really get it together to clean up in the long run,' " Merriman said.
Jerry Roper, chief executive of the Chicagoland Chamber of Commerce, said the Blagojevich scandal is nothing more than an unwanted distraction for him and others whose jobs are to encourage business investment in the area.
Still, "when there's these types of scandals, you have to take time to explain it away, and when you have to take time to do that, it's negative energy," Roper said, then added, "Anyone who damages our reputation, it's just one more dent in the side of our car that makes it difficult when it comes time to sell it."Copyright © 2015, CT Now